San Diego Biotech Cluster

The San Diego biotechnology cluster is among the top biotech clusters in the U.S. Here we define San Diego as San Diego County, which is a county located in the southwestern corner of the state of California, U.S. San Diego’s recognition as a life science industry cluster is relatively new, at least when compare to the prominence of its Californian rival in San Francisco and the Bay Area. According to the Milken Institute’s: America’s Biotech and Life Science Clusters Report, the founding of Hybritech, one of America’s pioneer biotech companies, in the Torrey Pines Mesa area in 1978 signified the first readily identifiable step that San Diego took toward becoming one of the world’ s pre-eminent biotech hubs.

Nowadays, the San Diego biotech cluster has more than 1,100 life sciences companies and more than 80 research institutes. Life sciences activity accounts for more than USD$31.8 billion of economic impact in San Diego. According to California Life Sciences Industry 2016 Report, San Diego biotech cluster employed 38,061 people in 2014.

The San Diego biotechnology cluster is among the top biotech clusters in the U.S. Here we define San Diego as San Diego County, which is a county located in the southwestern corner of the state of California, U.S.

San Diego’s recognition as a life science industry cluster is relatively new, at least when compare to the prominence of its Californian rival in San Francisco and the Bay Area. According to the Milken Institute’s: America’s Biotech and Life Science Clusters Report, the founding of Hybritech, one of America’s pioneer biotech companies, in the Torrey Pines Mesa area in 1978 signified the first readily identifiable step that San Diego took toward becoming one of the
world’ s pre-eminent biotech hubs.

Nowadays, the San Diego biotech cluster has more than 1,100 life sciences companies and more than 80 research institutes. Life sciences activity accounts for more than USD$31.8 billion of economic impact in San Diego. According to California Life Sciences Industry 2016 Report, San Diego biotech cluster employed 38,061 people in 2014.

In 2015, San Diego was ranked 4th in a study of biotech cluster in the U.S. by Genetic Engineering and Biotechnology News, lagging only Boston-Cambridge, San Francisco Bay Area and New York/ New Jersey. According to the 2014 JLL Life Sciences Cluster Report, San Diego life sciences industry gained $640.6 million of venture capital funding and $785.6 million of NIH funding. San Diego cluster produced 956 life sciences patents. The region has 9.5 million square feet of lab
space. The lab space will grow when sequencing giant Illumina completes its San Diego manufacturing centre which will be opened in the second quarter of 2016.

According to San Diego Regional Economic Development Corporation (SDREDC), the
county's life science jobs pay an average wage in excess of $80, 000 – 83% above the average pay for all jobs. Liftstream selected 44 public biotech companies in San Diego with a total market cap of over $37 billion and analysed their CEO compensation level. The Liftstream Board Director and CEO Compensation and Governance 2015 Report – San Diego Biotechnology Cluster revealed that San Diego biotech CEO salary increased 7.6% from 2012 to 2014 ($460,749), while CEO total compensation increased 76% during the same period to $2,574,362.

San Diego County contains three public state universities: University of California, San Diego; San Diego State University; and California State University, San Marcos. Major private universities in the county include University of San Diego (USD), Point Loma Nazarene University (PLNU), Alliant International University (AIU), and National University. The University of California, San Diego has become one of the top ten public universities in the country. San Diego County higher education institutions produce more than 7,000 STEM graduates annually.

Since its founding in 1961, University of California, San Diego has become one of the world’s leading universities for life science research. Ten UCSD faculties have been awarded the Nobel Prize. Nature, in its “Yearbook of Science and Technology”, has ranked UCSD as “one of the 10 most powerful research universities in the U.S.”

Furthermore, San Diego is home to the world famous Scripps Research Institute based in La Jolla. This biomedical science research campus has given birth to many exciting spin-out companies that have forged new understanding of diseases and have created significant innovation. Many of those companies continue to sit in close proximity to the 35 acre campus and some are part of this study. The Scripps Research Institute also abuts Salk Institute for Biological Studies and Sanford-Burnham Medical Research Institute.

San Diego is home to prominent biotechnology companies such as Illumina and Ionis Pharmaceuticals. Illumina provides a line of products and services for the sequencing, genotyping and gene expression markets. In 2014, Illumina was named the world's
smartest company by MIT Technology Review.

Alongside more established life science companies, San Diego has become home to many rising small to medium sized biotech firms. As one of the most innovative regions in the U.S., San Diego thrives on its highly entrepreneurial environment. The established research institutions have created a powerful research cluster in the region. Its partnerships with technology-focused networks of business and professional leadership have provided essential ingredients for successful biotech start-ups.
aTyr Pharma(rare disease), Cidara Therapeutics (anti-infectives), Fate Therapeutics (cellular immunotherapies) are just some examples growing firms with market cap less than $100 million.

In early 2012, Johnson & Johnson launched Janssen Labs (J-Labs) at San Diego, providing a capital efficient and flexible lab environment for start-up companies pursuing new technologies. Companies can license for space and equipment modular wet lab units on a short-term renewable basis and only pay for the space that they need, with an option to quickly expand when they have the resources to do so. The companies will also have access to core research labs hosting specialized capital
equipment and core administrative areas maintained by Janssen Labs operations management team. J-Labs San Diego’s alumni include Arcturus Therapeutics, Cidara Therapeutics, Mirati Therapeutics, NeuroTransit, Siferon Therapeutics, Sunvita, Vaxenta Biotechnologies, Wellspring Biosciences and Wibi+Works.

Being attracted by San Diego’s innovative environment, some life science firms are considering expanding their R&D presence in this area. Adaptive Biotechnologies, a sequencing and bioinformatics company based in Seattle, Washington, announced in March to build its Therapeutics Division in San Diego. According to Xconomy, Adaptive Therapeutics will eventually be based in San Diego with office space in Torrey Pines.

San Diego is regarded as US’ leading biotech venture and innovation capital hotspot. According to Ernst & Young Biotechnology Industry Report 2015, San Diego secured $654 million of venture capital in 2014. Along with The Bay Area ($1.4 billion) and New England ($1.3 billion), these three regions attracted 61% of all US venture investment in 2014.

According to Life Sciences Q3 2015 MoneyTree Report issued by National Venture Capital Association and PwC, San Diego received $200 million of venture capital investment. San Diego ranked 3rd US area received the most life sciences venture capital during the third quarter of 2015, lagging Boston and San Francisco Bay area.

With venture capital companies like Ampersand Ventures, Avalon Ventures, Domain Associates, Forward Ventures, ProQuest Investments, Shepherd Ventures and Western States Investment Group, San Diego is one of the leading centres for biotech investment. A considerable number of portfolio companies are acquired by big pharma such as Biogen, GSK and Celgene. Among portfolio companies, there is a mixture of San Diego-based biotech and firms in other regions. In Avalon Ventures’ portfolio, 14
companies are located in San Diego, while Domain Associates invests 10 San Diego-based biotech firms.

In April 2013, GSK and Avalon Ventures entered into a collaboration to fund and launch up to ten early-stage life science companies in San Diego. A joint management committee of Avalon and GSK will approve the formation of new companies based upon these technologies. Together, Avalon and GSK will finance these newly-established companies. Avalon Ventures will provide funding of up to $30 million from its recently announced $200 million Fund X. GSK will provide company seed funding, research
and development support and success-based preclinical and clinical milestones up to a total of $465 million for ten companies. GSK will retain the option to acquire each company upon the generation of a clinical candidate. Should GSK elect not to exercise its option, company ownership will remain with Avalon, which will be free to enter into other strategic transactions.

In November 2013, the joint venture announced the launch of Sitari Pharmaceuticals. Sitari raised $10 million in Series A financing and R&D support from Avalon Ventures and GSK for the development of novel treatments for celiac disease. In September 2014, Silarus Therapeutics and Thyritope Biosciences were formed through GSK and Avalon. Each firm receives up to $10 million in Series A financing and R&D support. In June 2015, the collaboration between Avalon Ventures and GSK launched
Adrenergic, CadheRx Therapeutics, and Calporta Therapeutics. Each company receives up to $10 million in a Series A financing and R&D support from Avalon Ventures and GSK. In November 2015, GSK and Avalon Ventures seeded a 7th start-up, lining up $10 million for Iron Horse Therapeutics.

In order to accelerate the commercialisation of university research, a group of alumni of the University of California, San Diego created a venture capital fund—the Triton Technology Fund—to invest in companies and technologies invented by UC San Diego faculty, students, and alumni in software, communications, electronics, materials, medical devices, and instruments.

Top 10 San Diego Head-quartered Publicly Traded Life Sciences Companies by Market Capitalisation

Company

Market Cap (21 Jan 2016)

Ranking

Illumina Inc. (ILMN)

25.05bn

1

CareFusion Corp. (CFN)

12.24bn

2

ResMed Inc. (RMD)

7.59bn

3

Ionis Pharmaceuticals Inc. (IONS)

6.91bn

4

Dexcom Inc. (DXCM)

6.00bn

5

Neurocrine Biosciences Inc. (NBIX)

4.28bn

6

Acadia Pharmaceuticals Inc. (ACAD)

2.56bn

7

NuVasive Inc. (NUVA)

2.31bn

8

Ligand Pharmaceuticals (LGND)

1.97bn

9

Gen-Probe Inc. (GPRO)

1.54bn

10

San Diego clearly shows the characteristics of a thriving biotechnology and life sciences cluster, with science, infrastructure and capital coming together. The other critical ingredient is people and their incredible wealth of experience and skills.